Lender liability is a hot topic these days, with TILA-RESPA Integrated Disclosure (TRID) in effect since Oct. 3. Although the Consumer Financial Protection Bureau (CFPB) has said it will be lenient to those who show they are making a good-faith effort to be in compliance, this does not preclude others, such as homebuyers and investors, from questioning the accuracy of a mortgage loan.
According to a blog by KRC&L, an attorney group in Texas, “The loan estimate and closing disclosure, delivery, content and timing requirements are now codified in Regulation Z and not Regulation X, and may give rise to the liabilities authorized by TILA, including private causes of action.
“Assignees are also subject to liability under TILA for violations that are apparent on the face of the disclosures.”
Although several participants contribute to a loan file, the lender does not always have knowledge of the actions these participants are taking.
This problem is a real when it’s the lender who is liable for any mistakes in the loan file. But what can lenders do to protect themselves as TRID progresses?
Two words: center control.
To illustrate this concept, here are three examples:
A common strategy in chess is center control or the theory that whoever controls the middle of the board, directly and indirectly, controls the game.
If you have control over the center, your pieces have greater range, mobility and influence than your opponent’s pieces.
The first rule in foosball is to keep the goalie lined up in the middle of the goal.
Many players’ shots will come straight down the middle. The dots on the table guide their eyes, and, therefore, their shots to the center. This is a good defense, but it is also a type of offense, as stopping these kinds of shots will also put you back in control of the ball with a chance to make a good goalie shot.
One of the most helpful strategies in racquetball is to always return to the center of the court after your shot.
Your opponent will try to set up a shot that is far away from you, making it more difficult for you to get to the ball in time. If you are in the center, you will always be the same distance away from the ball.
This technique puts you on the offensive just like in foosball, as you are not only preparing yourself for defense but keeping yourself in a good position to set up a difficult shot for your opponent.
Center control is also a valuable strategy for lenders and other mortgage participants. In the current mortgage process, the lender, real estate agent, title agent and vendors all use different systems to input information, which generates different versions of the loan file.
This creates problems because there is no way for the lender to track all actions and communications to ensure proof of compliance.
Compliance is not a game that mortgage industry professionals can afford to lose, with steep fines for regulatory violations.
Lenders need the entire mortgage process — from application to close — on a central system so they can track the other participants’ actions.
They need center control, with one digital file on which all participants collaborate, to assure the loan file is accurate and compliant.